Should you buy additional insurance when renting a vehicle?

Many travelers are understandably unsure about their coverage when they approach a car rental counter.

Do I buy the liability coverage or not?  Do I buy excess coverage?  These are some of the questions people ask.

Out of 632 consumers surveyed by the National Association of Insurance Commissioners (NAIC) 42% were either thoroughly confused or had only a rough idea about insurance.  As a result, many consumers purchase unnecessary insurance and end up wasting money.

Most often in North Carolina your personal auto insurance policy and a credit card used for the rental may provide sufficient liability coverage.

However, protection provided by credit card companies can be tricky and may contain strict conditions.  For example you may be required to notify the credit card company within 45 days of an incident.

In North Carolina, an insurer (car rental agency) by the terms of its policy can exclude liability coverage under an owner's policy if the driver of a vehicle (you the renter) is covered under your own liability policy for the minimum amount of liability coverage required by the Motor Vehicle Financial Responsibility Act.

The Act is satisfied if the terms of the policy exclude coverage in the event the driver of a vehicle is covered under some other policy for the minimum amount of liability coverage required by law.

In other words your own auto insurance will usually cover the loss if the insurance policy of the rental agency excludes coverage in case your own auto insurance policy carries the minimum amount of liability coverage required by the Motor Vehicle Financial Responsibility Act. 

In Jeffreys v. Snappy Car Rental, the NC Court of Appeals ruled that:

A car rental company was not obligated to provide $25,000 of primary liability coverage to a renter for an accident that occurred while the renter was driving the rental vehicle where the renter had a valid liability policy for the minimum amount required by the Financial Responsibility Act, and the car rental agreement specifically excluded liability insurance coverage.

It just happens so that sales of insurance or damage waivers that absolve renters involved in an accident are an important profit center for a car rental company.

Most auto rental companies sell several types of coverage: a loss damage waiver, supplemental liability insurance, personal accident insurance and personal effects protection among others.

Nonetheless, in many cases it makes sense to buy coverage from the car rental company, especially when it comes to coverage of the damage to the rental vehicle (collision coverage).

At times it may be a hassle dealing with a rental car company and others involved in an incident, especially if it happens abroad.  The rental car company may charge you upfront until your own auto insurance reimburses the loss.  Also, optional coverage can be a good idea even if you have full coverage, so that you can assure good standing with your own insurance company.

It always pays to take the time to understand what your insurance company and credit card issuer will cover. 

Finally, note that insurers of automobile rental businesses have been held not to be liable for damages when provisions of the rental agreement have been violated by the renter. 

For example in one case the North Carolina Supreme Court held that where automobile liability policy extended coverage to automobile renter and any person legally responsible for use of car, provided actual use was with permission of named insured, and renter rented car under agreement providing that renter would not surrender possession to any person under 21, insurer was not liable for injuries and damage inflicted when vehicle was being operated by 19-year-old to whom renter had surrendered vehicle without knowledge or consent of rental company.